Building a stronger, better balanced economy

Lee HopleyEEF Chief Economist

16th July 2013

Overview

• Economic ambitions v reality

• The role of manufacturing in a better balanced economy

• An industrial strategy – where now for government?

A different type of growth,forecast contributions to growth

• “gradual rebalancing of the economy, with business investment and exports playing a greater role and government spending and debt-fuelled consumption a smaller role.”

George Osborne 22/6/10

• “An economy that is seriously unbalanced both in its sectoral mix and in its regions.”

Vince Cable 03/06/10

• “To achieve a rebalancing we need to sell more to, and buy less from, economies overseas”

Mervyn King 19/10/10

Source: Office for Budget Responsibility

Some signs of growth,% quarter on quarter change in GDP

Source: National Statistics

..but the better balanced kind still elusive,business investment £m, and goods trade balance £m

Source: National Statistics

Manufacturing – ambitions and characteristics right for rebalancing

• Accounts for:

• Half of UK exports

• 70% of exports to BRICs

• 36% of manufacturers export

• Over 70% of BERD

• 13% of CT receipts

• 12% of capital investment

• Aiming for:

• Increased growth from emerging markets.

• Opportunities to diversify into new supply chains.

• Commercialising new technologies.

• Higher levels of productivity.

• Collaboration on innovation priorities.

Government has a role in supporting better balanced growth

• There is a lot going on!

• Sector strategies

• Localism

• Infrastructure

• Business Bank and review of business support

• Tax reform – competitiveness and simplification

• £1tillion export target

• But something is still missing…

A strategy for growth

A vision for the economy beyond simply balancing the books with a coherent approach across

government and clear accountability

A clear vision for the economy

Consistency and accountability across government

900,000 SMEs paying for corporation tax cut with lower capital allowances

Tax avoidance debate

Unilateral carbon tax pushing energy costs above

EU counterparts

No plan to promote FLS to those who need it

Adding costs with pay audits and fines for employers

losing Tribunals   

Migration policy encourages foreign students to leave

after graduation

Bad for Growth

Good for Growth

50,000 companies benefitting from lower

corporation taxes

Lowering the regulatory burden from the CRC

Commitment to keep green policies in line with the rest

of Europe

£80 billion Funding for Lending Scheme to increase flow of cheaper finance to

business

Reducing regulation with Tribunals and Redundancy

laws reform

Apprenticeships funding increased with efforts to

drive up standards

Closer cooperation across

departmentsDecision-making

structures that are fit-for-purpose

Open and transparent commitment to make

progress on its economic ambitions

Not just implementation – decisions must be

aligned with ambitions

Transparency on progress

Making it happen…

Ambition How will we know we are making progress?

More cos bringing new products and services to market

Include innovation funding in the Science budget ring fence and retain national decision-making on spending

A further 25% expansion of the TSB SMART scheme

More globally focused cos expanding in the UK

Long term capital allowances reform

Review potential action to increase competition in SMEs banking, including a switching incentive

A lower cost of doing business

Implement Loftstedt review to simplify H&S regulation

Compensate electro-intensive manufacturers

Work with EU partners on better regulation

A more productive and flexible labour force

Reinstate the Tier 1 post-study work route

Extend Industrial Partnerships across the economy

Re-directing funding for apprenticeships from providersto employers through the tax system

A foundation for rebalancing

Energy

Access to financeEducation

Infrastructure Taxation

Regulatory Burden

Planning

Higher skill levels

Tax and investment

Export support

Procurement

Higher education/ business collaboration

Tax and innovation

TSB/ catapults Sector councilsForesight projectTechnology

support Future

proofing

Supporting business entering new markets

Helping businesses invest and expand

Industry business environment priorities

Creating a sustained

strong foundation for business

More businesses

bringing new

products and

services to market

More globally-focused

companies choosing

to expand in the UK

A lower cost of doing

business

A more productive and more

flexible labour force

Rebalancing